Supply Chain Management in a Changing WorldThe Challenges for Organizations and Managers AGENDA ⚫ Understanding the business world ⚫ Understanding the customer ⚫ Understanding the organisation ⚫ Understanding the value chain ⚫ Understanding the individual manager ⚫ Barriers to success ⚫ The way ahead 2 AGENDA ⚫ Understanding the business world ⚫ Understanding the customer ⚫ Understanding the organisation ⚫ Understanding the value chain ⚫ Understanding the individual manager ⚫ Barriers to success ⚫ The way ahead 3 Global forces are shaping a radically different competitive environment … and the frontiers of competition are changingat an ever increasingrate Compe titive Pre s s ures in the Supply Chain Ever more demanding cus to mers and cons umers Changing market boundaries and new channels Shorte ning product life cycles Aggres s ive global compe titio n Hypercompetition Speed of te chnology change S take holder pres s ures + Indus try cons olidatio n and alliances Globalis ation Environmental and ris k is s ues Serving localis ed cus tomer needs through longer, more complex s upply lines 4 AGENDA ⚫ Understanding the business world ⚫ Understanding the customer ⚫ Understanding the organisation ⚫ Understanding the value chain ⚫ Understanding the individual manager ⚫ Barriers to success ⚫ The way ahead 5 A new customer is emerging … Consistency Service Convenience Selection ⚫ Customers want buying to be Quality ➢ easier Risk ➢ faster Price ➢ cheaper Effort Time ➢ more fun ➢ … real value These trends are forced up through the value chain 6 Suppliers will seek solution-based offers … ⚫ They will focus on ➢ providing tomorrow’s customers with solutions ➢ shifting from commodity products to differentiated solutions ➢ world-class products and world- class service ➢ enthusing their customers ➢ Reaching out to understand their customers’ customers ⚫ Suppliers will expect their suppliers to react in the same way 7 AGENDA ⚫ Understanding the business world ⚫ Understanding the customer ⚫ Understanding the organisation ⚫ Understanding the value chain ⚫ Understanding the individual manager ⚫ Barriers to success ⚫ The way ahead 8 “Our Focus is on markets and brands, but without an effective supply chain, we cannot even begin to compete” Chairman, Unilever 9 Business pressures in the new millennium The top 5 ⚫ Globalisation ⚫ Hypercompetition ⚫ Focus on core competence ⚫ Speed of change ⚫ Stakeholder pressures Source: European Supply Chain Direc to rs Dis cus s ion Forum, - 2000 to 2002 Doing nothing is not an option 10 Globalisation “As the world shrinks, supply chains become longer and more complex” Alan Waller 11 Hypercompetition ⚫ The customer demands excellence across all competitive dimensions ⚫ Supply chain performance will make or break the competitive offering ⚫ Businesses need to excel at designing and executing all key customer-facing business processes throughout the end-to-end value chain 12 Focus on core competence Businesses are responding by focusing on core competencies and outsourcing noncore activity creating networked organisations Vertical integration Source: Chatham House Forum Network organisation 13 Speed of change - fuelled by technology Functional Products Design-make-sell Process Hierarchical Organisations Innovative Sell-design-make Networked Focused Passive Guarded Manufacturing Customers Information Agile Interactive Available to all Fast Organised Turnover Speed of Change Growth Focus Planning Warp Speed Chaotic All areas of business are challenged Profit 14 Stakeholder pressures ⚫ Customer pressures - attracting and retaining profitable customers ⚫ Shareholder pressures - competing for funds - not just sales ⚫ Employee pressures - competing for people - not just markets ⚫ External pressures - legislation / regulators / environmentalists / public opinion 15 AGENDA ⚫ Understanding the business world ⚫ Understanding the customer ⚫ Understanding the organisation ⚫ Understanding the value chain ⚫ Understanding the individual manager ⚫ Barriers to success ⚫ The way ahead 16 Developing a strategic supply chain vision ⚫ The globalised Supply Chain must deliver the required service at the lowest total cost ... This requires: ● ensuring all supply chain players work together, by integrating ● across functions ● across borders ● across interfaces ● developing and implementing strategies to deploy all assets to give an optimised total value chain ● plants and warehouses (internal and suppliers/distributors) ● sales offices ● product portfolios ● service centres ● IT and support services ... which can only be achieved through EXPLOITING eSUPPLY CHAIN OPPORTUNITIES AND SOLUTIONS IN SUSTAINABLE PARTNERSHIPS 17 Economies of scope in technology and innovation ... In automotive production resource sharing has already happened ⚫ One people carrier ⚫Vehicle manufacturers’ share ● Galaxy ● One plant ● Sharan ● One assembly track ● “Purchased by the hour”? Contract Manufacturing “Co-Makership” will increase “Partner with your competitors and compete with your partners” 18 Drivers of the 21st Century Supply Chain ⚫ Consumers ⚫ Retailers ● ● ● ● Ever more demanding ● Pro-active ● Interactive Global Seek solutions Increase range ⚫ Manufacturers ● Focus on core ● Co-makership ● Network/outsource ● Mass customisation ● Agility ● Process driven ⚫ Systems ● ERP ● Bolt-ons ● Process driven SUPPLY CHAIN RESPONSE ⚫ Technology ● New channels ● New business ● Low cost 19 Threecentral themesemergeconsistently ontheCEOagenda Strategic Imperatives The Key Enablers Managing at the Pace of Change ⚫ “How do we deliver distinctive value and differentiated service to local customers whilst at the same time exploiting opportunities from a globalised view of supply chain?” ⚫ How do we align the whole enterprise - people, processes,operations, technology, suppliers , other business partners - around a programme of progressive strategic change“?” ⚫ “How do we futureproof, and build agility, into our supply chain operations in response to the pace of external change and ever increasing pressures from shareholders and competitors?” 20 Twelve Imperatives for Outstanding Supply Chain Performance Business Integration and Performance Drivers Searching for Structural Advantage Adding Value to the Customer 1. The Customer Value driven Supply Chain 2. Differentiation through the Product Offering Strategic Imperatives 5. Integrating / 3.Global Operations Synchronising the Supply Chain Network 6. Operations beyond the Productivity Edge Restructuring 4. Strategic Sourcing and Co-Venturing Partnerships Key Enablers 8. People and 7. Process and Performance Measures Behaviours 9. Business Structure and Organisation 10. High Performance Partnerships Managing at the Pace of Change 12. Agilityand Ability to Respond to Change 11. Leveraging Information and Technology 21 Managing at (or beyond) the pace of change Some key messages which emerge…. ◼ “Board level leadership is essential for success” ◼ “Agility to respond to changing market circumstances is key for survival… and can be a competitive weapon in its own right” ◼ “Don’t get locked in by assets, partnerships, people or systems” ◼ “Strategic change must be built into the ‘everyday job’ “ ◼ “Achieving agility should be seen as an investment, and therefore may require short term sacrifices” ◼ “The old model of strategy, design and implement is dead… the future model will be vision led… with continuous implementation, continuous benefits, “proving by doing” and pro-active adaptation of strategy” 22 The benefits – some recent experience Client Value Ide ntified ⚫ 8% reduction in total manufacturing and logis tic s cos ts ⚫ 5% reduction in total ⚫ Pers onal Care Products manufacturing and logis tic s cos ts ⚫ Computer Supplies ⚫ 15% reduction in total logis tic s cos ts , including s ignificant inventory reductions (30-40% ) ⚫ Engineering Plas tic s ⚫ 25% decreas e in total logis tic s cos ts ⚫ FMCG Manufac turer ⚫ Healthcare Products ⚫ Cons umer Products ⚫ Wines and Spirits ⚫ 20% inventory reduction Strategy Focus ⚫ Focus ed factory s ourcing and regional warehous ing ⚫ Retail logis tic s res tructuring, new s ourcing arrangements , European DC ⚫ New European DC, with introduction of DRP ⚫ New s ourcing arrangements , centralis ation of s low movers , res pons ive trans port s ys tem ⚫ Regional logis tic s s tructure ⚫ 30% reduction in total logis tic s ⚫ Regional logis tic s cons olidation in heartland, with s atellite warehous es cos ts ⚫ 60% reduction in finis hed goods inventories and £2-3m p.a. in operating s avings ⚫ National network rationalis ation and s upply chain s ynchronis ation In all cases, with increasedCustomer ServiceacrossEurope 23 “By 2019, aro und 70% of SCM func tionality will be pro vided fro m outside the enterpris e [80% pro bability]” Gartner Group 24 Outsourcing in the supply chain continues to grow reflecting focus on core competencies Is co-venturing a viable alte rnative ? Dis tributio n and Trans port Warehous ing Info rmation Manag ement Produc tio n New Product Development Supply Chain Manag ement Now Within five years Purchas ing 0 1 2 3 4 5 No 0 Yes Overall trend In hous e Outs ourced … and many nowregard co-venturingas an alternative 25 Supply chain outsourcing requirements in the new millennium The top 5 ⚫ help with developing strategic supply chain vision ⚫ help with implementing supply chain vision ⚫ access to economies of scale ⚫ access to skills and competence ⚫ access to technology and innovation Source: European Supply Chain Directors Dis cus s ion Fo rum – 2000 to 2002 e SCM capability will become golddus t 26 Drivers of Collaboration Between Supply Chain Players Along s upply chains ⚫ Strate gic optimis ation – end-to -e nd s upply chain s truc ture ⚫ Inte g ratio n - s upply chain pro ces s es ac ro s s o rg anis ations ⚫ Synchro nis ation – s ys tems s panning o rg anis ations And ac ro s s s upply chains ⚫ Economies of s cope – multi-us er s olutions 27 Co llabo ratio n is … [i] “ Wo rking with othe rs for mutual benefit” 28 Co llabo ratio n is … [ii] “Willing ly as s is ting the enemy” 29 Collaboration - putting technology into perspective “A bus ines s can have all the te chnology in the world, but if I don’t trus t my trading partne rs the n it becomes very diffic ult.” “This is not about beating a s upplier into s ubmis s ion - it’s ac tually about s haring info rmatio n, s ome of it compe titive .” Gartner Group 30 “Ente rpris es that employ collabo rative SCM technologies to optimis e bus ines s pro ces s es will thrive , whe re as thos e that do not will los e marke t s hare .” Gartne r Group 31 The Present – A Case Study Show me the network! John Doran Logistics Director (until 30/9/03) Sony Europe – EMCS (Engineering, Manufacture & Customer Service) Sony Europe EMCS logistics Curreent s ituation ⚫ Direct control and influence ➢ Consumer electronics 3PL / 4PL • Games – Playstation • REE (Recording, Energy, Europe) • BPE (Broadcast & Profesional Europe) Total logistics spend > €300milion 33 Current network locations 5Hub Warehouse 18Country StockholdingLocation Helsinki 5Plants Copenhagen Dublin Pencoe d Hamms Hall Thatcham Eragny Tilburg Cologne Prague Ribeauville Zurich Trnava Vienna Godollo Milan Lisbon Barcelona Athens 34 Network locations 2003/2004 5Hub Warehouse 3 C o u n tr y S to c k h o l d i n g L o c a ti o n Helsinki Plant Closed Whs. Copenhagen Pencoe d Thatcham Tilburg Prague Ribeauville Trnava Zurich Godollo Milan Barcelona Athens 35 Sony Europe EMCS logistics Cu rentsituation ⚫ Warehousing mostly internal some outside ⚫ Transport ➢ Very fragmented ➢ 125 companies ➢ 25 relationships with Deutsche Post ➢ 200+ accounts with DHL ⚫ Project to rationalise 36 Who Can Satisfy Sony Requirements ? ⚫ ⚫ ⚫ ⚫ ⚫ European One Stop Shop ➢ Channel ➢ Geography ➢ Relationship management Uniform standards ➢ Service ➢ KPI’s ➢ Tariffs Partnership ➢ Share risk & benefits ➢ Build long term Flexibility ➢ Allow our business to change ➢ Manage resource up & down ➢ Share risk Innovate ➢ What value to do you add? ➢ Why should I choose TNT above Versteijnen Transport? 37 How to move forward Improving European Transport/Logistics – Catalysts for Change Initiative Source Ranking Collaboration 1 Shippers 2= LSPs 2= E-Freight Exchanges 4 E-Marketplaces 5 Technology Providers 6 Capital Providers 7 Consultants 8 Source-European Survey Alan Waller 2001-2002 38 50 Impact on the manager in the supply chain Jobs for life Employment Education for life Reference books Knowledge Education Life of jobs Life of education Gateway to the world Manage the business Functional Performance Organisational performance KPI’s Management Vision Change the business Cross-functional performance Supply chain performance Solo working Direction Competitive Ways of working Relationships Leadership Team working Empowerment Collaborative Managers will need to be focused but flexible - for life 51 AGENDA ⚫ Understanding the business world ⚫ Understanding the customer ⚫ Understanding the organisation ⚫ Understanding the value chain ⚫ Understanding the individual manager ⚫ Barriers to success ⚫ The way ahead 52 Bridging the Implementation Gap Pan-regionalsupplychainintegrationacrossEurope % of Companies 100% Opportunity Awarenes s Strategy Planning 75% Active Imple mentation 50% 25% Effective Imple mentation 0% ‘86 ‘88 ‘90 ‘92 ‘94 ‘9 6 Source: Surveys 1992, ‘98 ‘00 ‘02 1994 , 1996 and 2002 There are major challenges in translatingvision into reality 53 People and information are the critical ingredients and information depends on people Barriers to supply chain improvement – 1998 /2000 survey Management of Management of People Information ( 43% ) ( 24% ) Company Culture 10% Organis atio n Structure and Performanc e Me as ures 8% No. 1 Quality of Manag ement 10% Lack of appropriate IT s ys tems 14% Workforce Skills 4% Power Play 6% Fear of Change 5% Lack of information availability and integrated planning 10% Unlike 2-4 years ago the systems are now available 54 New mindsets and management behaviours are required Total Commitment to Cus tomer Service Anticipate End Cus tomer and Manag e Demand Proactively End-to-End Supply Chain Me ntality K ey Management Behaviours Switch from a Stock Pus h to a Demand Pull Philos ophy Focus on Performance of Extended Enterpris e Manag ement of Partners hips 55 For many this is a major shift away fromtoday’ s functional ways of working Leveraging Technology – the key issues “The technology is now available to do whatever we want in the supply chain ------- the problem is that either it is not mature enough to be used or we are not mature enough to use it” Source – Discussions groups Logicon Interactive 2001 , 2002 & 2003 56 AGENDA ⚫ Understanding the business world ⚫ Understanding the customer ⚫ Understanding the organisation ⚫ Understanding the value chain ⚫ Understanding the individual manager ⚫ Barriers to success ⚫ The way ahead 57 The Way Ahead ⚫ Stand back and take a careful look at where you sit in your supply chain ⚫ Decide the critical elements of the proposition to the end customer and how the total supply chain needs to help deliver this ⚫ Decide what your critical focus needs to be and which other supply chain players are critical to your success ⚫ Decide who you are going to partner with and how you will do it ⚫ Get your own house in order and then reach out to your supply chain partners ⚫ Develop strategy, processes, and connectivity ⚫ Start small and use trials to “prove by doing” ⚫ Agree up front how to share the investment and benefits ⚫ Ensure that technology and systems are backed up by cross business processes, new people skills, and a partnership culture across the 58 organisations The Business shape of the future - Outsourcing Supply Chain Performance - Collaboration - Partnering Business Performance Focus on core competence 59 The Manager of the future Business Breadth Supply Chain capability Team working Leadership Networking Professional Depth •Functional capability •Skill development •Professional development Knowledge development Professional development 60 62
